Attorneys: Yukos to seek $20 billion in damages

Associated Press

Published 6:30 am, Wednesday, December 22, 2004

Attorneys for Russian oil giant Yukos told a U.S. bankruptcy judge in Houston today that the company plans to wait until a sale of its key production subsidiary is finalized then seek $20 billion in damages from the buyer.

Yukos filed for Chapter 11 bankruptcy last week here in a last-ditch effort to block the auction of Yuganskneftegaz — which pumps about 11 percent of Russia's oil.

The company had hoped an emergency order issued by the U.S. judge would cancel the auction, but it went forward with the previously unknown BaikalFinansGroup offering the winning bid of just over $9 billion. The sale is set to close Jan. 7.

Yukos plans to seek $20 billion in damages from whoever the new owner of Yuganskneftegaz turns out to be. Some have speculated that Gazprom, an international gas energy titan that's 40 percent owned by Russia, was somehow involved in the winning bid.

Attorney Tony Davis told U.S. Bankruptcy Judge Letitia Clark at today's status hearing that he is representing Gazpromneft, which had been created just months before the auction and was sold off Friday in a move Moscow analysts say was intended to dodge the U.S. bankruptcy court order blocking it from participating in the auction.

Clark issued the order to protect the company's assets as part of its bankrupcty filing.

Davis said his firm does not represent Gazprom. He added that Gazpromeft did not participate in the auction as ordered by the court.

Yukos attorney Zack Clement said Yukos is pursuing Gazprom and Gazpromneft as possibly being behind the winning bid.

Clement told Clark the court should take notice that the Russian government "is completely aware of these proceedings and attends." He pointed out that Russian Consul General Nikolay Sofinskiy was in the courtroom today.

Clark asked if Sofinskiy would like to be heard and he declined.

"I prefer to stay here," he said.

Yukos spokesman Richard Mintz said the "world's most expensive game of hide-and-seek" is taking place.

"Gazprom, the Russian government and other Russian companies are clearly working together to cloak the true ownership of BaikalFinansGroup," he said.

Lawyers and analysts said there were no agreements between Russia and the United States that could make the Houston court's decision enforceable on Russian soil.

President Vladimir Putin on Tuesday affirmed the legality of the $9.3 billion sale of the crown jewel of the Yukos oil empire. He suggested the subsidiary's new owners could eventually link up with another Russian energy company — or even a Chinese conglomerate.

The Russian government planned to sell the subsidiary to pay off some of the $27.5 billion in back taxes it says is owed by Yukos, Russia's largest oil producer.

The Russian government's targeting of Yukos and its owners has been seen as a Kremlin-driven effort to seek retribution for former CEO Mikhail Khodorkovsky's funding of opposition parties and complaints of government corruption. Russian president Vladimir Putin has characterized the effort as a crackdown on corruption and dubious accounting.

Khodorkovsky is being tried for fraud and tax evasion, and has been jailed for 14 months.

Yukos is set to return to the U.S. bankruptcy court for its next hearing Jan. 6.